It was a phone call from veteran insolvency specialist and former Victorian Liberal Party President Ian Carson at the tail end of Melbourne’s tortuous 2020 Covid lockdown that gave Lindsay Maxsted the chance to return to doing what he loves most. For years Carson, the current President of the Victorian Arts Centre and a Trustee […]
It was a phone call from veteran insolvency specialist and former Victorian Liberal Party President Ian Carson at the tail end of Melbourne’s tortuous 2020 Covid lockdown that gave Lindsay Maxsted the chance to return to doing what he loves most.
For years Carson, the current President of the Victorian Arts Centre and a Trustee of the Melbourne Cricket Ground, had been thinking about establishing a restructuring fund to rescue companies affected by external shocks.
Then last year, as he was strolling along St Kilda Beach during lockdown, he decided to put the idea into action and discussed it with several trade unions and industry superannuation funds.
“They liked the concept, but they said I needed a partner. So I called Lindsay,” Carson says.
Three decades ago Maxsted made his name at KPMG as one of the nation’s top insolvency experts when he worked retrieving what was left from the debris of the 1980s’ excesses from corporate wrecks like Bell Group and Bond Brewing.
After leaving KPMG, as the global financial crisis took hold in 2008, he did the same for Centro Properties.
That year Maxsted also joined the Westpac board and served as chairman for eight years before bringing forward his departure at the end of 2019 when the bank was sensationally accused of breaching anti-money laundering laws by allowing payments linked to child abuse in Asia.
The scandal also claimed the scalp of then chief executive Brian Hartzer.
At his final Westpac annual general meeting at Sydney’s Darling Harbour Convention Centre in December 2019, Maxsted stood on his feet for five hours to face a barrage of abuse by irate shareholders seeking accountability for the risk management failings exposed by Austrac.
In his opening chairman’s address he offered what he called the “deepest of all apologies” for the bank’s failings and reiterated his contrition in the hours that followed.
“I expressed my views at the time about all of that and I still remain exactly the same as then,” he now says.
“Since then what I said then and what the board was saying then was fully ratified and confirmed with independent reviews that Westpac released and then both the regulators said they would cease their investigations and move on.”
Westpac’s own investigation into the saga found the events that led to its failure to report the international money transfers were the result of sloppy work and an “immature and reactive” risk culture, but were not deliberate.
Then in March this year the prudential regulator APRA said it had found Westpac’s anti-money laundering failings did not breach the Banking Executive Accountability Regime (BEAR) or the Banking Act and closed its investigation, two-and-a-half months after the Australian Securities and Investments Commission also ended its probe.
“There was some awful commentary at the time. Certain people chose to say those things. Those people don’t know me and the board of Westpac and Westpac as the wonderful organisation it is and has been,” Maxsted adds.
“That was sad and disappointing. I had all sorts of emotions at the time. But it needs to be put in that context.”
Now, more than a year on from his Westpac exit, Maxsted has become a director of a new restructuring fund run by Carson, launched by investment banker John Wylie’s Tanarra Capital Group.
“I got the phone call from Ian during lockdown and I said I thought the whole concept had legs. By that stage John had invited me to join the Tanarra Capital advisory board and I had said yes to that in the middle of last year. So I talked to John about Ian’s idea and John bought it straight away,” Maxsted tells The Weekend Australian in his first interview since his Westpac departure.
“To go back in an advisory role in an area I know and really like, it has a nice feel to it and an element of comfort. The businesses will be different but the principles of the work hasn’t changed.”
Known as Tanarra Restructuring Partners, the firm will partner with the owners of troubled businesses and their bankers to initially provide debt funding but also working capital to allow them to not only retain jobs, but grow their operations in the post-Covid world.
Carson and Maxsted go back a long way in the insolvency profession. The former started his career with Coopers & Lybrand and founded workout specialist Carson McLellan, that later became PPB Advisory. It was sold to PwC in 2018.
“We were practicing as managers in our firms at the same time,” Maxsted says.
“We didn’t do a deal together or work against each other. But we had mutual respect for the practices and the individuals.”
Carson says he always admired the way KPMG and its predecessor Peat Marwick had “brought the next generation through.”
“To me that was always a bit of a beacon and a testament to the people,” he says.
Carson’s timing was also opportune.
Maxsted had been thinking about post-listed company life after also finishing up a 9 year stint on the BHP board early in 2020, where he was pipped for the chairmanship in 2017 by former Amcor boss Ken MacKenzie.
“I haven’t ruled out doing another listed company but that would be highly unlikely. A natural spot is to go back to where I was which is private company and private equity land. When Ian phoned me, I was already thinking about the sorts of things I wanted to do in that field,” Maxsted says.
Despite what happened at Westpac, he retains the chairmanship of toll road giant Transurban – his current three year term expires in October 2022 and he will not seek re-election after 9 years as chair – and in that capacity he remains in dialogue with major institutional investors.
“I have been able to get feedback and have contact with that community in that role. It is in that context I feel very comfortable still being the chairman of Transurban,” Maxsted says.
The 67-year-old says he feels no stain on his reputation from the way his Westpac chairmanship ended following the stunning revelations it was under investigation by the federal financial crimes regulator Austrac.
Westpac was ordered by the Federal Court last year to pay $1.3 billion in penalties after admitting to breaches of anti-money laundering laws and for failing to stop child-exploitation payments in what was the largest fine in Australian corporate history.
Last year Maxsted accepted John Wylie’s invitation to join the Tanarra Capital advisory board, which is chaired by former Prime Minister Paul Keating.
The other members are London-based Marks & Spencer chairman Archie Norman, Tokyo-based consultant and Chair Emeritus of the Australian and New Zealand Chamber of Commerce in Japan, Melanie Brock, and Garry Weaven, known as the godfather of the industry super fund movement.
Maxsted is also joining the investment committee of Tanarra Credit Partners, which is currently seeking to raise $500m for its second credit fund to invest in sub-investment grade loans in Australia and New Zealand and some higher yielding investments across Asia-Pacific.
He says Tanarra Restructuring Partners is working to have more than $100m raised for its first fund close by June 30. Most of that money will be from family offices, with six already committed.
“It may be a bigger venture in the sense of co-investment. Some matters might be too big for the fund but some of our investors have an appetite to co-invest separately,” Maxsted says.
Wylie, Maxsted, Carson and former Fortescue executive and Perth-based Tanarra principal Anna Shave will sit on the investment committee.
Former Deutsche Bank and Morgan Stanley director Michael Phillip will be chief investment officer.
“Michael is a person who has done 15 years of buying and selling debt and is a key member of the team,” Carson says, adding that the fund will invest in 6-9 companies using senior secured debt or convertible notes and is targeting a return of 12-15 per cent.
“The banks are very cautious about selling debt and careful about what happens to the owners if it is sold. So we have developed a jobs charter. We will pull every other lever before we get rid of jobs. The concept is to protect the businesses and partner with the owners,” he says.
“Part of the thesis is if we can turn around and grow these businesses, others will come to us. The banks will want to bring their customers to us.”
Carson and his wife Simone are the founders of Coles Group-backed food rescue charity SecondBite, so the former has also vowed to invest 10 per cent of the profits made by Tanarra Restructuring Partners into social entrepreneurs.
“John and Lindsay agreed with that without hesitation,” Carson says.
“There is a huge collision of everything I have done in my life in what we are doing here. It is a good opportunity to make a difference.”
He says 10 opportunities have come to Tanarra in the past month. Three are serious deal prospects, in the tourism, food and technology sectors.
“When we started this it was about Covid. As it has developed, we won’t need Covid for this fund because the banks always have issues with clients,” he says.
“There is a reduction in commercial construction, some projects have slowed down or stopped. So suppliers to that sector are challenged. International education hasn’t come back so there will be ramifications there. And there is some in tourism and travel. Jobkeeper only stopped at the end of March so we would expect some fallout from that.”
Maxsted says while the macro-Australian economy is travelling “stunningly well”, there are “micro pieces where some sectors have been left behind.”
“The China trade issue and businesses being impacted by that is high on our radar,” he says.
Tanarra is now also in discussions with superannuation funds to build out the scale of the fund in the future to $300m.
Most importantly, it wants to provide the nation’s bankers with an extra option before turning to offshore vulture funds and private equity operators to sell debt in troubled businesses.
“Traditionally the banks have syndicated a big package of debt, but they have not generally sold bilateral debt. They are saying to us that this is an extra tool in our tool kit, an extra option we didn’t have,” Carson says.
After his Westpac experience, Maxsted knows better than most the critical issues around big bank reputations in aftermath of the Hayne Royal Commission and Austrac scandals. Now he wants to help from the outside.
“If a bank did sell bilateral debt in Australia and it went bad, it won’t be the customer’s fault, it won’t be the vulture funds’ fault, it will be the bank that sold it six months or six years ago. That is real,” he says.
“Obviously these sort of matters do not get to bank boardrooms but that would now be inculcated throughout all the big banks that if they are to move these customers on, they need to be as sure as they can be that they have put them into responsible hands.”
DAMON KITNEY, VICTORIAN BUSINESS EDITOR